Ministry of Consumer Affairs, Food & Public Distribution
Centre doubles incentive on sugar sacrificed for producing ethanol from October 2021
Move to encourage sugar mills to divert excess sugar cane/sugar to ethanol & to achieve targets of blending ethanol with petrol
Sugar mills that will be diverting sugar to ethanol would be getting the entire quantity of sugar sacrificed on producing ethanol in their monthly release quota
With a view to maintain the demand supply position of sugar in the country and to stabilize ex-mill prices of sugar and also to ensure sufficient availability of sugar for domestic consumption, mill wise monthly release quota of sugar for domestic sale by sugar mills is allocated by Department of Food and Public Distribution under Ministry of Consumer Affairs, Food and Public Distribution every month on the basis of stocks held by them, export performance and diversion of sugar to ethanol.
With a view to encourage sugar mills to divert excess sugar cane / sugar to ethanol & to achieve targets of blending ethanol with petrol in line with Ethanol Blended with Petrol program, incentive on sugar sacrificed for producing ethanol from B-heavy molasses/sugarcane juice/sugar syrup/sugar has been doubled from October 2021, onwards in their monthly release quota. Now, those sugar mills which will be diverting sugar to ethanol would be getting the entire quantity of sugar sacrificed on producing ethanol from B-heavy molasses/sugarcane juice/sugar syrup/sugar in their monthly release quota.
It is pertinent to mention here that in every sugar season , production of sugar is around 320-330 Lakh Metric Tonne  as against the domestic consumption of 260 LMT which results in huge carry over stock of sugar with mills. Due to excess availability of sugar in the country, the ex-mill prices of sugar remain subdued resulting in cash loss to sugar mills. This excess stock of 60 LMT also leads to blockage of funds & affects the liquidity of sugar mills resulting in accumulation of cane price arrears.
With a view to prevent cash loss to sugar mills caused due to subdued sugar prices, Government in June, 2018 has introduced the concept of Minimum Selling Price  of sugar & fixed MSP of sugar at Rs. 29/ kg which was revised to Rs. 31/ kg w.e.f 14.02.2019.
To liquidate excess stocks, the Centre has also been extending assistance to sugar mills to facilitate export of sugar. In sugar seasons 2017-18, 2018-19 & 2019-20, about 6.2 LMT, 38 LMT & 59.60 LMT of sugar was exported. In previous sugar season 2020-21 against target of 60 LMT contracts of about 70 LMT have been signed, 67 LMT have been lifted from mills & more than 60 LMT has been exported till 28.09.2021. The international prices of sugar are in up trend, so, contracts for export of about 15 LMT have been signed to export sugar in the sugar season 2021-22 & that too without announcement of any export subsidy. It is expected that in the sugar season 2021-22 also, India can export about 60 LMT of sugar.
The Centre is taking several steps for diversion of sugar to ethanol. In order to find a permanent solution to address the problem of excess sugar, Government is encouraging sugar mills to divert excess sugarcane to ethanol. Government has fixed target of 10% blending of fuel grade ethanol with petrol by 2022 & 20% blending by 2025.
Till year 2014, ethanol distillation capacity of molasses based distilleries was less than 200 crlitres. Supply of ethanol to OMCs was only 38 crorelitres with blending levels of only 1.53 % in ethanol supply year  2013-14. However, in past 6 years due to the policy changes made by the Government, the capacity of molasses based distilleries have been doubled and are currently at 464 crlitres. Capacity of grain based distilleries are presently about 258 crlitres.
Production of fuel grade ethanol and its supply to OMCs has increased by 5 times from 2013-14 to 2018-19. In ESY 2018-19, we touched a historically high figure of about 189 crlitres thereby achieving 5% blending.
It is expected that in current ethanol supply year 2020-21 , about 300-325 crltrs ethanol is likely to be supplied to OMCs to achieve 8 - 8.5 % blending levels. As on 26.09.2021, against the contracts of 349 crltrs, 252 crltrs ethanol have been supplied by sugar mills / distilleries to OMCs for blending with petrol thereby achieving 8% blending. It is also likely that we will be achieving 10% blending target by 2022.
With a view to support sugar sector and in the interest of sugarcane farmers, the Government has also allowed production of ethanol from B-Heavy Molasses, sugarcane juice, sugar syrup and sugar.
Government has been fixing remunerative ex-mill price of ethanol derived from C-heavy & B-heavy molasses & ethanol derived from sugarcane juice/ sugar/ sugar syrup for ethanol season to encourage mills to divert excess sugarcane to ethanol. To increase production of fuel grade ethanol, Govt. is also encouraging distilleries to produce ethanol from maize & rice available with FCI. Government has fixed remunerative price of ethanol from maize & FCI rice.
In sugar seasons 2018-19 & 2019-20 about 3.37 & 9.26 LMT of sugar was diverted to ethanol. In sugar season 2020-21, about 24 LMT of excess sugar has been diverted to ethanol. In sugar season 2021-22, it is likely that about 35 LMT of excess sugar would be diverted to ethanol. By 2025, it is targeted to divert 50-60 LMT of excess sugar to ethanol, which would solve the problem of high inventories of sugar, improve liquidity of mills thereby help in timely payment of cane dues of farmers.
In past three sugar seasons about Rs. 22,000 cr revenue was generated by sugar mills/ distilleries from sale of ethanol to OMCs. In previous sugar season 2020-21, about Rs. 12335 cr revenue has been generated by sugar mills from sale of ethanol to OMCs which has helped sugarcane mills in making timely payment of cane dues of farmers.
In sugar season 2020-21, sugarcane of worth Rs. 91,000 cr was purchased by mills, which is at all-time high level & is the second highest next to the procurement of paddy crop at Minimum Support Price. Keeping the expected increase in the production of sugarcane in the sugar season 2021-22, sugarcane of worth Rs. 1,00,000 crore is likely to be purchased by sugar mills.
With a view to increase the income of sugarcane farmers, Government has fixed Fair & Remunerative Price of sugarcane at Rs. 290/ qtl at 10% recovery for sugar season 2021-22, which is Rs. 5/ qtl higher than the current sugar season.
As a result of pro-farmers measures taken by the Government of India, about 99% of cane dues of previous sugar seasons have been cleared. Even for the sugar season 2020-21, out of total cane dues payable of Rs. 91685 cr , about Rs. 85020 cr have been paid & only Rs. 6665 cr are pending as on 29.09.2021; thus 92% cane dues have been cleared which is the historically highest paid amount in percentage wise & amount wise by mid of September in any sugar season. The domestic ex-mill prices of sugar are also now stable & are in the range of Rs. 33.50 -36.50/ kg which would enable sugar mills to make timely payment of cane dues to farmers in ensuing sugar season 2021-22. The average retail price of sugar in the country is likely to remain in the range of Rs. 38-42/ kg in coming months which is not a cause of worry.
To achieve blending targets, Government is encouraging sugar mills and distilleries to enhance their distillation capacities for which Government is facilitating them to avail loans from banks for which interest subvention @ 6% or 50% of the interest charged by the banks whichever is lower is being borne by Government. This will bring an investment of about Rs. 41,000 crore.
As a result of these measures it is likely that ethanol distillation capacities in the country would be more than doubled by 2025, which would ensure achievement of 20 % blending target. It will address the problem of surplus sugar & ensure timely payment of cane dues of farmers.
There will be massive impact on country’s economy due to 20% blending by 2025.
- It would benefit maize & paddy farmers, would addresses surplus grain problem; about 165 lakh tons of grains will be utilized.
- Diversion of 60 lakh tons of surplus sugar would address the problem of surplus sugar, checks depressed sale of sugar, improves liquidity of sugar mills and will ensure timely payment of cane dues of farmers
- It will bring new investment opportunities as about Rs.41, 000crore would be invested to set up new distilleries in rural areas & would result in job creation in villages.
- Would improve air quality, reduces Carbon Monoxide emission by 30-50% & Hydrocarbon by 20%.
- Would save foreign exchange of about Rs. 30000 cr on account of crude oil import bill and would reduce dependence on imported fossil fuel thereby would help in achieving the goal of Atmanirbhar Bharat in petroleum sector.